Oil falls on hopes for ceasefire in Middle East

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Last Updated: Tue, Nov 20, 2012 21:00 hrs

The price of oil fell sharply Tuesday on signs that Israel and Hamas are close to putting a halt to fighting that has lasted nearly a week.

Benchmark crude finished almost 3 percent lower as a diplomatic push to end Israel's offensive in the Gaza Strip gained momentum. Egypt's president predicted that airstrikes would end soon, and Israel's prime minister said his country would be a "willing partner" to a cease-fire with the Islamic militant group Hamas.

Secretary of State Hillary Rodham Clinton also headed to the Middle East to meet with leaders of the two sides and encourage a peace deal. The trip marked the most direct U.S. engagement in the conflict so far.

Benchmark crude fell $2.53, or 2.8 percent, to finish at $86.75 per barrel in New York. That wiped out a similar gain on Monday, when oil closed above $89 per barrel for the first time in a month.

Meanwhile AAA said gas pump prices dropped slightly and are now the lowest since July 16. The national average of $3.41 per gallon is down 26 cents from a month ago, but still 5 cents higher than a year ago.

Brent crude, which is used to price international varieties of oil, fell $1.87, or 1.7 percent, to end at $109.83 a barrel in London.